Market Update – January 26, 2022
Courtesy of Drew Haynen, Van Zee Commodities
The cattle market has been a rollercoaster the last couple weeks. Last week was a great up week with April moving from $140/cwt to $144/cwt. A steady grind higher with optimism coming from packing facilities starting to kill more cattle. The cash market traded mostly steady with the previous week, even with smaller kill numbers at $138/cwt live or $218/cwt in the meat. There has been a lot of worry in the last month that another covid spout in the packing plants would drop kills down substantially due to worker shortages. Kills were down 20,000 head two weeks in a row showing the effect. However, many packing plants and traders are thinking that we could be almost back to normal by next week. I don’t think that a lot of cattle have backed up through this slow period and packers seem to need cattle, so I am hoping that next week cash could be $140/cwt or higher in the north. This should give a bullish look to the Feb and April markets.
There was a bearish report concerning cattle on feed published last week Friday that has been weighing on the cattle market this week. It showed record high placements of 600-700 lb. cattle, with most of the drought area having to move their feeder cattle early. This should put pressure on the back months and feeder cattle, which it did through the first half of the week. It sounds like feeder cattle placements should drop off after January. I think that we should have a good run-in feeder cattle in the near future that will correspond with a rally in fat cattle and a slower placement rate in February. I also believe that the corn market does not need to move much higher which gives me a bullish sentiment in the feeder cattle also.
The grains have been strong the last couple weeks. Three things are pushing the markets in my opinion. The South American weather. There has been some beneficial rain in Argentina that should help crops and there has been drying in northern Brazil, which is where there was too much rain. Some analysts still forecast a large drop in production for South American crops because of weather conditions but hopefully good finishing weather will push their yields higher. The second thing moving crop prices higher is the tension in Ukraine. Russia moving more troops to the border, and the USA moving some troops to Ukraine, has people nervous about the Ukraine export market. Ukraine exports most of their corn and wheat crops. Without them in the export market, many of their customers will have to look in other places like the USA for their grain needs. The third thing pushing the corn market is the price of fertilizer. These prices have been trending lower the last couple weeks, but it does have farmers in different regions looking at soybeans, cotton, or other crop acres this spring. We need a good number of acres in corn to push these prices lower next fall.
The USDA had a crop report on January 13 that showed the current carry outs in corn are at 154 billion bushels which is 47 million more than last month. This is giving us a stock to use ratio of 10.4% which shows we will have plenty of corn to make it through the year. The USDA has average corn cost for the year at $5.45 a bushel. This and the stock to use ratio give me hope that corn can move lower in the coming months.
|Cattle and Grain Markets for January 26, 2022|
Sheep and hay data compiled by Ross Bronson, Ag Risk Consultant, Redd Summit Advisors
Slaughter lamb markets for under 80 lbs. were weak to $15/cwt lower while heavier weights were steady to $20/cwt higher this week. Slaughter ewes were also steady to $15/cwt lower this week. The USDA estimated domestic lamb and mutton meat production for the week ending January 15 totaled 2.08 million pounds on a slaughter count of 33,000 head down 120,000 pounds and 2,000 head when compared to the previous week’s totals of 2.2 million pounds and 35,000 respectively. Lamb and mutton imports since quarter 2 of 2021 have been higher than expected. Imported lamb and mutton meat for the week ending January 8 totaled approximately 6.01 million pounds which equates to 273 percent of the domestic production for the same period. High lamb prices coupled with higher imports suggests that U.S. lamb demand has shifted up compared to last year. Higher domestic demand and prices will encourage increased imports of lamb and mutton.
|Sheep markets for week ending January 21, 2022|
|Current Week||Prior Week||Percent Change||Prior Year||Percent Change|
|Feeder Lamb Prices, Medium and Large 1-2, 60-90 lbs, Wtd Avg, $/cwt.|
|Ft Collins, CO||$347.29||$322.50||7.70%||NQ||NA|
|Sioux Falls, SD||$350.00||$430.00||-18.60%||NQ||NA|
|Light Weight Slaughter Lamb Prices, Choice and Prime 1-3, 60-90 lbs, Wtd Avg, $/cwt.|
|San Angelo, TX||$390.00||$390.00||0.00%||$364.00||7.10%|
|New Holland, PA||NQ||$434.72||NA||$313.83||NA|
|Slaughter Lamb Prices, Wtd Avg, $/cwt.|
|Neg. Pur. Live||$234.15||$236.57||-1.00%||$155.99||50.10%|
|Form. Pur. Carcass Base||NQ||NQ||NA||NQ||NA|
|Comp.-Form. & Neg.Carcass Base||NQ||NQ||NA||NQ||NA|
Trading is slow in many regions, but the Desert Southwest and Central California show moderate trading. Dairies are showing good demand thanks to improving milk prices, but it remains to be seen if the higher prices will sustain. Precipitation is still of concern. Although recent small systems have helped the Pacific Northwest, and snowpack levels were looking good coming into the new year, more recent dry weather has most states at about average levels of precipitation.